Former AIG Chief Hank Greenberg Settles Fraud Case -- Update
February 10 2017 - 5:44PM
Dow Jones News
By Leslie Scism
Maurice R. "Hank" Greenberg struck a $9 million settlement to
resolve 12-year-old civil-fraud allegations brought against him by
New York's attorney general tied to when he ran American
International Group Inc.
The government originally had sought billions in damages.
The settlement enables the 91-year-old to end litigation that
capped a long career in which he built AIG into a global
powerhouse. Mr. Greenberg ran AIG for nearly 40 years before being
pushed out in 2005 as a probe by then-New York Attorney General
Eliot Spitzer was under way.
Mr. Greenberg's longtime lawyer, David Boies, said in an
interview that, in settling, his client "is not acknowledging
anything improper."
New York's current attorney general, Eric Schneiderman, issued a
news release late Friday with a headline saying Mr. Greenberg
"Admits to Initiating, Participating and Approving Two Fraudulent
Transactions." Mr. Greenberg admitted to his involvement in the
transactions, Mr. Boies says, but not in fraud. He has said he
relied on advisers in making the decisions.
In a statement Friday, Mr. Greenberg said that as a result of
the transactions, AIG's financial statements "inaccurately
portrayed the accounting, and thus the financial condition" of the
company in two areas.
The state's allegations pertain to a pair of financial
transactions that the state alleged were designed to deceive
shareholders by making AIG's results appear rosier than they were.
One of them involved bolstering AIG's claims reserves, which some
investors monitor closely for signs of health of an insurance
company.
Mr. Greenberg and the attorney general's office agreed to
mediation late last year as the long-delayed trial, in a state
court in lower Manhattan, was in a middle stage. Testimony began in
September, and the state wasn't through laying out its evidence,
after about 16 partial and full days in court, when it paused for
the settlement talks.
The mediation was overseen by Kenneth Feinberg, an attorney who
specializes in alternative dispute resolution.
The elderly Mr. Greenberg testified for six days last fall,
including long stretches of tough questioning by the state as
attorneys walked through details of the long-ago transactions.
For much of the time, Mr. Greenberg spoke softly and calmly,
frequently telling the state's lawyers that he couldn't recall the
specifics of meetings and conversations from so long ago. He got
testy a few times when the lawyers pushed hard for
recollections.
Mr. Greenberg had phoned the chief executive of Berkshire
Hathaway Inc.'s General Re unit to initiate one of the two
transactions. That "reinsurance" deal boosted AIG's reserves at a
time some analysts and investors were concerned about whether the
levels were sufficient, but the state said they had no other
obvious economic purpose. Berkshire wasn't named as a defendant in
the lawsuit.
AIG itself faced allegations of accounting improprieties by New
York authorities. In 2006, it agreed to a $1.6 billion pact, split
between the Securities and Exchange Commission and New York, to
settle the civil-fraud charges. It earlier had restated prior
earnings, including changing the accounting for the two
transactions.
Also testifying last fall in the nonjury trial was Howard Smith,
who was AIG's finance chief for Mr. Greenberg at the time of the
deals. He similarly faced civil-fraud allegations brought by the
attorney general and has newly reached a settlement with the state,
Mr. Schneiderman's office said.
AIG declined to comment.
Write to Leslie Scism at leslie.scism@wsj.com
(END) Dow Jones Newswires
February 10, 2017 18:29 ET (23:29 GMT)
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